With an annual generating turnover between $60 trillion to $70 trillion, global family-owned businesses (FOBs), which are expected to grow bigger with investments and portfolio diversification among others, are faced with the familiar foes of money, power, and emotions.
Africa with Nigeria, Egypt, Algeria, and South Africa, is home to a handful of FOBs, according to the 2023 EY and University of St.Gallen Family Business Index.
The drive to want to lead without the acumen and qualifications, greed, mismanagement of funds, and emotionally focused system are seen threatening the expansion of FOBs.
This is according to industry players at various panel sessions at Family Business Summit 2024, Theme ‘Family Business Legacy: Strategies for building and maintaining multigenerational wealth’, while discussing challenges and potentials of FOBs going into the future.
“Three things that affect family business are money, power, and emotions. So, if you keep that at the back of your mind and you try and set guidelines for those three things, you can typically manage the succession problem, said Ife Bakare, Executive Director, Strategy & Innovation, Medplus.
In his keynote speech, Olasupo Olusi, Managing Director of the Bank of Industry, revealed that these businesses have shown great commitment to perseverance, adaptability, and remarkable resilience, growing from small local shops to conglomerates.
“Despite their significant economic impact, only 30 percent of FOBs transition to the second generation, 12 percent survive into the third, and merely 3 percent continue into the fourth generation and beyond (Family Business Alliance),” he said.
Meanwhile, the growth of FOBs has been observed to have surpassed that of the global economy.
The 2023 EY and University of St.Gallen Family Business Index reveals that the top 500 family enterprises generate an impressive $8.02 trillion in revenue and employ 24.5 million people worldwide.
“If FOBs were to be a country, this performance would rank them third only behind the US and China.”
A family business is a commercial organisation in which decision-making is influenced by multiple generations of a family, related by blood, marriage, or adoption, who have both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals.
Sam Abu, Country and Regional Senior Partner, West Africa at PricewaterhouseCoopers (PwC) Nigeria have revealed that a staggering 70 per cent of global wealth creation can be attributed to family businesses.
Abu said that despite preserving family wealth, building structures, and mechanisms that ensure sustainability across generations, significant global disruptions affect businesses.
“Technological advancements such as Artificial Intelligence and digital transformations create challenges for business operations and transformation; Sustainability and ESG integrate major principles for businesses and Globalisation in new markets creates competition and vulnerability,” he said.
Abu added that the African economy faces unique challenges like fluctuating naira, inflation, exchange rate volatility, and high exchange rates but remains one of the fastest-growing regions in the world.
“Despite the challenging business environment, Africa has immense potential for investment and expansion. Family businesses in Nigeria struggle with balancing family values with governance and professionalism, family traditions with technology innovations, transitioning from owners to successors,” he said.
He concluded that the best way to overcome these challenges is to focus on strategies and innovations to build a better family business and embrace technology and new mechanisms for generational wealth.
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